The postulated precursor of the prosthetic dehydroalanine of phenylalanine ammonia-lyase (PAL), serine 202, was changed to cysteine by site-directed mutagenesis. After cloning and heterologous expression in Escherichia coli, the gene product was assayed for PAL activity. Mutant S202C showed full catalytic activity, and its kinetic constants and the amount of thiol groups were identical to those of wild-type PAL. It must be concluded that in a posttranslational modification both water and hydrogen sulfide can be eliminated from the amino acid in position 202 to form dehydroalanine. In an attempt to identify further amino acids essential either for the posttranslational modification or for catalysis, arginine 174, glutamine 425, and lysine 499 were changed to isoleucine. Analysis of the heterologously expressed mutated gene products revealed that only the R174I mutant showed a significantly lower Vmax value (1/450) identifying this arginine as important. This finding was supported by treatment of wild-type PAL and mutant R174I with phenylglyoxal and 2,3-butandione. Both react specifically with the guanidino group of arginine. They irreversibly inhibited wild-type PAL but had no influence of the Vmax value of mutant R174I. Preincubation with l-phenylalanine protected wild-type PAL from inhibition by phenylglyoxal indicating that arginine 174 is close to the active site. Incubation with KCN irreversibly abolished the remaining activity of mutant R174I leading to the conclusion that arginine 174 is important in catalysis.